Assignment (7)

1. You decide to deposit $5,000 at a local bank for three years at a 8% rate of interest compounded quarterly. The future value of your investment is most nearly equal to ________.
2. $6,200
3. $6,340
4. $6,430
5. $6,800

1. $10,000 is put in a investment account today. The investment account compounds interest at a rate of 1% per month. What amount will be available five years from today?
2. $10,510
3. $16,000
4. $17,623
5. $18,167

1. You have discovered an investment opportunity that earns a 6% rate of interest compounded semiannually. What amount should you deposit today to have $5,000 in three years?
2. $3,832
3. $4,100
4. $4,187
5. $4,237

1. Punjab Company borrowed $114,000 from its bank. Punjab will repay $150,000 in 7 years. What is the approximate interest rate that Punjab will incur on this loan, assuming annual compounding?
2. 3%
3. 4%
4. 5%
5. 6%

1. A series of equal periodic payments in which the first payment is made one compounding period after the date of the contract is ________.
2. an ordinary annuity
3. an annuity due
4. a deferred annuity
5. a compound annuity

1. ) What is the primary difference between an ordinary annuity and an annuity due?
2. the interest rate
3. annuity due only relates to future values
4. ordinary annuity only relates to future values
5. the timing of the periodic payment

1. Zendor Company wants to have $200,000 available in August 2021 to make an equipment purchase. To be able to have this amount available, Zendor will make equal annual deposits in an investment account earning 12% annually in June 2017, 2018, 2019, 2020, and 2021. What is the dollar amount that must be deposited each of those years to achieve this objective?
2. $22,700
3. $31,480
4. $40,000
5. $55,480

1. Anne wants to accumulate $25,000 by December 31, 2019. To accumulate that sum, she will make twelve equal quarterly deposits of $1,761.55 at the end of March, June, September, and December for the next three years, beginning on March 31, 2016, into a fund that earns interest compounded quarterly. What annual rate of interest must the fund provide to yield the desired sum?
2. 3%
3. 7%
4. 12%
5. 14%

1. Assume that you have the opportunity to receive $5,000 at the end of each of the next five years. Given an interest rate of 6%, how much would you be willing to pay for this investment today?
2. $22,326
3. $21,062
4. $19,587
5. $3,736

1. Bangin Inc. financed the purchase of a machine by making ten annual payments of $13,000 with the first payment due today. The purchase cost of the machine is considered to be the present value of those payments. What was the purchase cost of the machine to Bangin assuming a discount rate of 9%?
2. $59,633
3. $75,467
4. $83,429
5. $90,938